By now, it has become quite clear that as a generation, Millennials have a very different take on home ownership than their parents and grandparents did. This trend has been studied extensively in the West, but it has made itself quite obvious in India too. How do Millennials view home purchase differently in general, and in India in particular?
In the first place, this is a generation of people who were hands-on with technology from childhood onwards. Social media, Google and the blog universe have been part of their life from the word ‘go’. Millennials also display a much higher ability to adapt and accommodate than the previous generations, which is why co-working has become such a relevant concept in India today.
This very dynamic generation has been defined in many different ways, but we generally consider people who were born between 1980 and 2000 as Millennials. At a generation level, we see that the boundaries between work and pleasure, business and leisure and indeed workplace and residence have become far less distinct than they were before. Home is where the computer and PlayStation are, the workplace is where the free Wi-Fi, recreation area and VC room are. Millennials who have finished college and are professionally active tend to have quite a bit of the ‘digital nomad’ in them.
A renting generation?
The hitherto unprecedented ability and willingness of Millennials to adapt is one of the chief reasons why the market for the rental homes in India is stronger today than ever before. Millennials are not as particular about the status value of their address as they are about the connectivity, conveniences and security of a neighbourhood. They want to be able to get to work and back home quickly and enjoy a decent level of social amenities in the area they live in.
For many of them, buying a home in such an area may be beyond their financial capability, so renting makes complete sense to them. However, even if it is affordable, Millennials as a global breed do not necessarily view buying a home as the best of investment choices and may choose to put their surplus cash into stocks instead.
Apart from the fact that many of them move around quite a lot, an increasing number of Millennials also have the option to work at home, wherever that happens to be. Either way, staying flexible with location can be an important consideration for many Millennials during their active career life. Globally, especially in the highly developed countries, the Millennial Mindset as a factor influencing residential market trends highlights a definite predilection for renting as opposed to buying homes. We are also seeing this trend in India, but it is far less distinct.
The Indian Millennial
There can obviously be no cookie-cutter approach to studying the preferences of an entire generation – and those of their offspring, who basically grow up absorbing the preferences of their parents. The near-impossibility of trying to slot this generation in a neatly-labelled category becomes even more evident when we consider how Millennials actually differ quite a lot from country to country. For instance, different attitudes towards renting or buying homes in different parts of the United States and Europe are readily apparent.
In Asia, the variations are even more distinct, primarily because employability and prosperity levels tend to vary vastly in most cities. India, where the gulf between the earning power and therefore investment appetite of different parts of the population even within the same generation can be vast, is a prime example.
To say that Indian Millennials prefer to rent homes would be a senseless generalization. In this massive sub-continent, people come from different economic and social backgrounds. We do see many common traits of the Millennial generation among Indians who have had the good fortune of a good education – for instance, digital savviness, a willingness to blend their professional and personal lives, and the tendency to travel a lot. However, we also see that parental and societal influences can still hold considerable sway.
Therefore, an Indian Millennial often opts for home ownership where his or her global counterparts may happily live their entire lives in rental homes. In India, no single factor conveys a feeling of security and social integration quite as much as a self-owned home does. Buying a home may or may not make the same kind of investment sense as stock market speculation. However, an Indian Millennial is very apt to consider owning a home as an essential and fundamental basis from which to launch the rest of his or her other life plans.
Also, the regular income of a rented-out second home conveys a much stronger sense of financial stability in India than investments in the stock market. While it is true that like the stock market, the real estate market is also driven largely by sentiment, it is equally true that the real estate market is not nearly as fickle. Furthermore, there is almost never a dearth of demand for rental homes in a country where the largest part of the population can still not afford to buy homes and indeed consists of transient workforces which depend solely on rental accommodation.
In other words, owning property tends to make a lot more sense to an Indian Millennial. Again, this trend can vary pretty significantly from state to state and even city to city, depending on several factors including:
- The affordability of real estate
- The average level of education among the local population, which influences purchasing power
- The kind of employment opportunities being generated locally, and
- The social influences at play
Within the scope of home ownership, an area where we have seen considerable change is the kind of homes that millennials prefer over their forebears:
- Super-sized luxury homes are generally out, compact homes with good potential resale value are in
- Snob-value addresses are out, local conveniences and connectivity are in
- Projects by unknown developers are out, projects by well-known developers are in
- Poorly-developed and therefore insecure locations are out, local and in-project security is in
- Focus on the lowest ticket size is out, focus on value for money is in
- Non-availability of parking spaces is a complete deal-breaker
Some of these requirements may seem natural and logical when one considers them today, but they are actually the result of a generation which lives, works and thinks very differently than the previous ones. While Indian Millennials do continue to traditional influences, they are equally wired into the realities of modern-day India where positives such as technology evolution, vastly improved infrastructure and a significantly revamped job market, as well as negatives like proliferating crime, urban decay and traffic chaos all play a role in the where, when and how of home purchase.
Developers have had no option but read the writing on the fall and fall in line with the more exacting requirements of Indian Millennials. Builders who have stubbornly held on to their ‘traditional’ success formulas and not deciphered these market signals tend to find themselves with few if any takers for their projects. The sea-change the market has undergone and the new influences that drive it are very evident from the kind of features that builders now highlight in their hoardings, product brochures and radio jingles. Indeed, the Millennial Factor has induced a major revolution in the Indian residential real estate space – and it will only keep changing from here on.
Anuj Puri is Chairman of ANAROCK Property Consultants.